Patricia W. Holden, a partner in Cipriani & Werner's New Jersey office, obtained a favorable coverage trial court decision involving the issue of proper notification of cancellation. This decision has implications for third party defense and UM/UIM benefits claims alike.
The case arose out of a motor vehicle accident in which Ms. Holden's client, a defendant/driver, was using his boss' personal auto with permission to run a work errand. After the client was involved in the accident and same was reported to the host vehicle's carrier, the host vehicle's insurer denied coverage claiming that the policy was cancelled the day before the accident. Ms. Holden challenged the effectiveness of the cancellation on behalf of her client by filing a third party complaint seeking indemnification.
At the close of discovery, the trial court held a one day bench trial to determine whether or not the host vehicle's carrier had properly cancelled the vehicle policy. The carrier had alleged that it properly cancelled the policy for underwriting reasons because its insureds failed to provide a proper driver's license number of one of its insureds' household members. It sent a notice of cancellation but Ms. Holden argued that it did not maintain the proper proof of mailing and a contemporaneously certified true copy of the notice per New Jersey statutory and regulatory guidelines.
After hearing testimony from the insured owner of the vehicle and the representative of the insurance company, the trial judge found that the insurer did in fact get a "no hit" on the driver's license number provided to it for the household member in question. It contacted the insureds via email and phone to which its insureds did not respond. However, the insured vehicle owner testified "with some equivocation" that he had faxed and mailed a copy of the driver's license to the insurance company. The carrier issued a notice of cancellation with an effective date of cancellation twenty days later. The accident occurred the day after the effective date on the notice. The notice of cancellation was sent by first class mail. The judge indicated that the parties disputed whether or not a duplicate copy of the notice was retained as required by statute. The carrier argued it had a practice of electronic retention of the document that complies with the statute and regulations.
On the law, the judge said that an auto insurance carrier must properly mail and properly certify its cancellation notices pursuant to New Jersey's statutory and regulatory scheme. Both prongs of the statute must be met to satisfy the cancellation notice requirements. The Court found that a copy of the notice produced by the carrier with the words "certified true copy of original" printed on it, without any certification or employee signature on the notice, did not meet the statutory requirements. There was also no certification of an employee who generated the mailing or who was actually involved in the mailing. Therefore, the Court found that the carrier did not provide evidence that would rise to the level of a certification that the notice was mailed in compliance with the statute. Consequently the notice of cancellation was not effective and the host vehicle's carrier was deemed to owe coverage to Ms. Holden's client, the permissive user, as well as the insured vehicle owner.
The matter is on-going as the liability and damages aspects of the personal injury case have yet to be tried and it is anticipated the host vehicle's insurer may appeal the trial court's coverage decision.
However, the take away for all carriers providing auto liability insurance in New Jersey is that electronic storage of these types of policy cancellation notices is not enough to meet the statutory requirements of proper cancellation in New Jersey. The rules were configured at a time when electronic data storage was not the primary means of retaining critical documents and so a hard copy notice with a signed certification of the person generating the notice is still required until the law catches up to current technology.